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Finance

World's top central banks offer three-month dollar credit to calm market

Central banks of US, euro zone, Canada, Britain, Japan, Switzerland coordinate

The move was designed to bring down the price banks and companies pay to access U.S. dollars.   © Reuters

FRANKFURT(Reuters) -- The central banks of the United States, the euro zone, Canada, Britain, Japan and Switzerland agreed on Sunday to offer three-month credit in U.S. dollars on a regular basis and at a rate cheaper than usual.

The move, accompanying a second surprise rate cut by the Federal Reserve in as many weeks, was designed to bring down the price banks and companies pay to access U.S. dollars, which has surged in recent weeks as a coronavirus pandemic spooked investors.

Under the joint plan, the six central banks agreed to begin offering US dollars weekly with an 84-day maturity at 25 basis points over the overnight index swap (OIS), in addition to their existing operations with one-week duration.

"The new pricing and maturity offerings will remain in place as long as appropriate to support the smooth functioning of US dollar funding markets," the ECB said in a press release.

"The swap lines are available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses, both domestically and abroad,"

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